Is CRA Avoiding Audits of Right-leaning Charities Filing Inaccurate Returns?

The Broad­bent Insti­tute is call­ing for an inde­pen­dent inves­ti­ga­tion into CRA audit­ing choices after a study by the left-leaning non­profit (but not char­ity) found strange inconsistencies.

The study con­clu­sions sug­gest that pro­gres­sive crit­ics of the Harper government’s pub­lic poli­cies are being tar­geted by CRA while right-leaning char­i­ties are get­ting spe­cial treat­ment despite seem­ingly inac­cu­rate annual reports.

Their find­ings add to what has been acknowl­edged by pol­icy aca­d­e­mics since 2012, as out­lined in my the­sis, that Canada’s tax­man has been politi­cized by the cur­rent fed­eral gov­ern­ment and its cred­i­bil­ity compromised.

The insti­tute, named after for­mer fed­eral NDP leader Ed Broad­bent, looked at the web­sites and other pub­lic com­mu­ni­ca­tions of 10 right-leaning char­i­ta­ble orga­ni­za­tions that have declared that 0% of their resources were devoted to allow­able “polit­i­cal activ­i­ties.” The dec­la­ra­tions were made on the annual fil­ings to CRA for the three years of 2011–2013 and are pub­licly available.

Despite the char­i­ties hav­ing declared no polit­i­cal activ­i­ties, the Broad­bent study found exam­ples of appar­ent “polit­i­cal activ­ity” com­mu­ni­ca­tions for all 10 orga­ni­za­tions in each of the three years.

Some of the sam­ples are fairly mild calls for changes in gov­ern­ment poli­cies or con­tin­u­a­tion of policies—as per­mit­ted under CRA reg­u­la­tions. Oth­ers have more bite to them in their call for changes—again gen­er­ally per­mit­ted so long as a respect­ful tone is used. But a few com­ments seem to be push­ing up against the unfor­tu­nately fuzzy line where allow­able polit­i­cal activ­i­ties cross over into for­bid­den par­ti­san activ­i­ties (includ­ing one which seems to call on the leader of an oppo­si­tion party to pull the plug on a gov­ern­ment and force an elec­tion in order to stop a pol­icy being imple­mented). I would argue that the def­i­n­i­tion of par­ti­san activ­i­ties is too broad, but the issue here is about whether CRA is sin­gling out for audits those char­i­ties that have dif­fer­ent public-policy posi­tions than that of the cur­rent fed­eral government.

As reg­u­lar read­ers of this blog know, tax reg­u­la­tions allow char­i­ties to devote up to 10% of their resources (and higher for smaller char­i­ties) to polit­i­cal activ­i­ties. But these char­i­ties declared 0% despite what cer­tainly looks to an edu­cated observer to be meet the def­i­n­i­tion used by CRA (it must be noted that there is some con­fu­sion in the sec­tor about def­i­n­i­tions, but many of these par­tic­u­lar char­i­ties are large enough to afford to hir­ing char­ity lawyers to reduce their risk).

In con­trast, some left-leaning char­i­ties, or char­i­ties doing work on envi­ron­men­tal, human rights and inter­na­tional devel­op­ment, and social issues are being audited for polit­i­cal activ­i­ties despite hav­ing declared those activ­i­ties in their fil­ings. In most cases these orga­ni­za­tions have declared polit­i­cal activ­i­ties at 3% or less of their resources. Often, they are at 1–2%. The high­est of those audited pro­gres­sive char­i­ties is Envi­ron­men­tal Defence which declared a declin­ing per­cent­age, from 8%, 7%, and 5% in 2011, 2012, and 2013 respectively—still well below the 10% limit.

The obvi­ous ques­tion is why the unequal treat­ment? Why are orga­ni­za­tions that declare 0% polit­i­cal activ­ity when they seem­ingly are par­tic­i­pat­ing in polit­i­cal activ­i­ties not being audited, while some of the most respected char­i­ties in Canada are being audited despite hav­ing doc­u­mented their polit­i­cal activ­ity to CRA?

Could it be that CRA is audit­ing char­i­ties that declare polit­i­cal activ­i­ties, while assum­ing that they don’t need to worry about those who do not declare polit­i­cal activ­i­ties? Cer­tainly, that would be inept. But the sus­pi­cion, of course, is that the deci­sions about which char­i­ties to audit is rooted in darker impulses.

And the study also asks why the right-leaning char­i­ties seem not to know what con­sti­tutes a polit­i­cal activ­ity when the def­i­n­i­tion (though not crys­tal clear) is right there on the CRA web­site. “It raises ques­tions about the accu­racy of the fil­ings” of the 10 char­i­ties to CRA, notes the study. I’ll say.

The study care­fully notes that “the evi­dence pre­sented here is not intended to ques­tion whether these char­i­ties should or shouldn’t be engaged in polit­i­cal activ­ity. Rather, it is meant to raise ques­tions about how the CRA’s def­i­n­i­tion of polit­i­cal activ­ity is being inter­preted and the trans­parency of the CRA’s process for deter­min­ing which groups to audit.” They see bias.

In con­clud­ing, the Broad­bent report flags the grow­ing belief that the Harper gov­ern­ment has a pro­gram aimed at silenc­ing dis­sent (my the­sis used the word “muf­fling,” though some char­ity lead­ers and experts I inter­viewed pre­ferred “silenc­ing”). And it referred to the ”mount­ing evi­dence of a politi­cized CRA” before call­ing for an inde­pen­dent inquiry into CRA processes to ensure its fair­ness in enforc­ing reg­u­la­tions in the face of polit­i­cal interference.

“Pro­gres­sive or con­ser­v­a­tive, the blunt­ing of the abil­ity of civil soci­ety to advo­cate and to engage in that most fun­da­men­tal demo­c­ra­tic right—debate, and occa­sion­ally, dissent—should con­cern us all.”

As I’ve blogged pre­vi­ously, the solu­tion is not to audit right-leaning char­i­ties. Instead, the answer lies in call­ing off this witch-hunt and depoliti­cize CRA. And for gov­ern­ment to stop view­ing as ene­mies those in soci­ety, includ­ing expert char­i­ties, that have dif­fer­ent pub­lic pol­icy ideas than the cabinet.

Though the mech­a­nism remains debated, my the­sis found that the gov­ern­ment has influ­enced CRA to tar­get cer­tain char­i­ta­ble sec­tors, and pri­mar­ily from the pro­gres­sive end of the polit­i­cal spec­trum. And that the con­se­quence is dam­age to democ­racy from this bul­ly­ing abuse of power, and the loss of expert input to pub­lic pol­icy debates as char­i­ties alter their com­mu­ni­ca­tions out of fear of audits. Except, appar­ently, the right-leaning char­i­ties stud­ied by the Broad­bent Institute.

List of Char­i­ties Stud­ied for Com­mu­ni­ca­tion Activ­i­ties
Atlantic Insti­tute for Mar­ket Stud­ies
Cana­dian Con­sti­tu­tion Foun­da­tion
CD Howe Insti­tute
Energy Probe Research Foun­da­tion
Fraser Insti­tute
Focus on the Fam­ily
Fron­tier Cen­tre for Pub­lic Pol­icy
Insti­tute for Cana­dian Val­ues
Macdonald-Laurier Insti­tute
Mon­treal Eco­nomic Forum

Mean­while, please check out my Master’s the­sis and feel free to for­ward and tweet it. Check out media cov­er­age of my the­sis find­ings and the national con­ver­sa­tion it trig­gered. And you can fol­low me on Twit­ter: @GarethKirkby

I am a for­mer jour­nal­ist and media man­ager who recently com­pleted my Master’s the­sis for Royal Roads Uni­ver­sity and now work as a com­mu­ni­ca­tion pro­fes­sional. I have been awarded the Jack Web­ster Award of Dis­tinc­tion, among oth­ers, for my report­ing and editing.

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